captioning sponsored by wpbt >> it's going to take a lot to change their image given what they've gone through just within the last five years. >> susie: citigroup shares get slammed after the nation's third largest bank fails the latest stress tests. and from stress tests to black eyes, goldman sachs' reputation takes a hit as a top executive resigns with a very public goodbye. it's "nightly business report" for wednesday, march 14. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:

>> susie: good evening, everyone. my colleague, tom hudson, is off tonight. the sounds of relief are audible on wall street today. just a day after the federal reserve unveiled the results of the bank stress test. 15 of the -- 19 of the largest banks passing hypothetical tests which are their ability to withstand a severe recessio citigroup was among those that didn't pass and today shares fell over three percent as

investors weighed the bank. looking at what's in store for shareholders. >> reporter: one day after getting snubbed by the federal reserve, citi shareholders are perplexed. the fed says the nation's third largest bank isn't worthy of an invitation to the big bank party, yet citi says its capital levels are strong and it would've passed the fed's dreamed-up doomsday scenario if it hadn't asked permission to up its dividend. still, it's hard to say what's worse fociti: no tasty dividend or no invite to the fed's exclusive party? but some analysts say investors should not worry; the bank led by c.e.o. vikram pandit is in good hands. >> i think pandit put forth a sound strategy, a more focused strategy than citigroup had in the past, and i think he's on the right track. i don't think this 0.10% below the regulator's guidelines is really cause for concern. >> reporter: investors have good reason to be concerned. citi was one of the most damaged firms during the financial crisis, desperately in need of government bailouts.

and even though the bank has clawed its way back, a fed- approved dividend would be the stamp of approval shareholders have been waiting for. 2012 has been a decent year for citi shareholders as it's been for most bank stock investors. still, citi shares are down more than 20% from their year-ago price of $45. market pros are mixed on the outlook for the shares, with analyst david trone only lukewarm. >> we're neutral on citi. we think there are other stocks that are more interesting in our space. but the scenario of the coany being in deep trouble like they were in 2008, that's behind them. >> reporter: morningtar analyst sinegal has a target price for citi of $50 a share. >> i think what citi really needs to do is avoid major mistakes over the next few quarters, build a little bit of capital, show investors what kind of profitability it's capable of, and i wouldn't be surprised if the stock rallies in that case. >> reporter: still, that could

be a tall order even for one of america's biggest banks. after all, the world economy also to needs to lend citi a helping hand. erika miller, "nightly busess port," new york. >> susie: joining us now with more analysis on the banks and those stress tests, we are happy to have with us sheila bair, former chair of the federal deposit insurance corporation and now senior advisor at the pew charitable trusts. >> sheila, it's really great having you on the program. >> happy to be here. >> susie: i think the question that most people have, are banks most to normal? how you would you rate the health of the banking system right now? >> it's certainly stronger than it was in 2008. the cap sta capital cushions ar better. the sector is healing. uncertainties with the housing market in particular, but if the economy keeps improving, and hopefully it will, that should also strengthen bank balance sheets, and hopefully

we'll get to a cycle where with the strengthening, there will be confidence to make loans and reinforce the economic recovery. >but there's still a way to go with the >> >> susie: a year after vestests you were concerned about banks issuing dividends and boosting composition. your warnings were object heeded and banks did raise their dividends, and now they're doing it again. what are you're thoughts on that? are they in good shape to be paying out more? >> right. so i think we were successful with some of the institutes. citi got a token penny, and other smaller banks had their applications disapproved. it was premature. >> we didn't know what we were dealing with, and what type of losses might entail for banks. and the economy was morbid.

so things are better now. we have better clarity how things, are still there's unsupporter, but we know more than last year. europe is in better shape sxrkts economy seems to have recovered as well. i think there's better justification. as i look at the numbers and probably we're a little more generous than they should have be. >> susie: yo know, one thing that most americans remember from the banking crisis two big details. the concern that -- too big to fail -- and the concerns could the banks bring down the economy even though they passed these important stress tests? >> right, right. well, i think the stress tests involve a lot of regulatory judgment, and bank manager judgment. so i think that ibvestors and market analysts need to look at the data and decide for themselves how robust the numbers ar my prsonprefence is, i wish the fed had put more emphasis on liquidity,

volatility, and the leverage ratio. four banks if they had this scenario would have had leverage below four percent. one is risk based capital baseed on how risky the oohsets are, and then total assets. when you get in the crisis like 2008 the market looks at the leverage rationd don't trust the ratios. i wish they had put more weight on the leverage ratios, and the liquidity failure. hopefully next year that can be better incorporated into the process. >> susie: quickly, i wanted to pick up on more lending. american business owners and small business complained they can't get loans. do you think now they'll building able to get more loans, and more credit flowing through the economy? >> i hope so. again, this virtuous cycle, as the banks get more confident

to make loans and the business gets more confident to take out loans, hopefully it will reinforce physical. >> the low interest rate environment hurts certain -- and the risk premium for making a higher risk loan like a small business lone is object substantial with the real interest rates. low interest rates hurt am some borrowers. but for small borrowers, it hurts them >> susie: that's a longer krg fo anher time. >> okay. >> susie: thank you so much, sheila bair. we've been speaking with sheila bair, former advisor to the f.d.i.c. >> i'm sylvia hall. still ahead, state funding to colleges and universities is dropping nationwide. we take a look at one school system and how they're handling it. >> susie: stocks muddled along today as oil and gold prices fell and investors tried to make sense of those bank stress

tests. the dow rose 16 points, the nasdaq added nearly a point, and the s&p slipped just over a point. commodities came under pressure. oil prices fell more than a dollar to $105 a barrel as the fed's decision to leave rates unchanged tempered any upswing in crude prices. as for gold, it continued a two- day sell-off, losing another $51 today to $1,642.90 an ounce. the yellow metal is now off 4% in the past three sessions. tim harvey manages a gold e.t.f. and he recommends buying gold on the dip. >> everybody is expecting the debt ceiling to be raised again this year. obviously, we have an election. we have very important elections in europe, as well. we have elections in greece in italy and in france, and this is going to lead to greater instability in the euro zone, which has enough problems already. so i think this going to help gold in the medium to long term. >> susie: from gold to goldman

sachs-- the wall street investment firm got hit today with another public relations problem. london-based executive director greg smith quit his job and wrote a scathing resignation letter in today's new york "times." in the op-ed letter, he accused goldman for its "toxic and destructive" environment. darren gersh looks at what the letter says about goldman's culture. >> reporter: by now, goldman sachs c.e.o. lloyd blankfein is used to critics calling him a "money-sucking vampire squid"-- or worse-- but this morning the attack came from one of his own. in his "i quit" letter, greg smith, a mid-level executive for goldman sachs, said he was sick of a culture where clients were called "muppets" and employees were expected to "hunt elephants" by getting clients to make big trades th ledo big profits for goldman. smith closed with this parting shot: "people who care only about making money will not sustain this firm or the trust of its clients for very much longer."

"hard-hitting and accurate"-- that's how charles ellis, author of the partnership, the making of goldman sachs, describes smith's op-ed. >> goldman sachs had a unique, privileged position of trust, and it needs to rebuild the base upon which its clients can trust it. >> reporter: and ellis has some advice for blankfein as he struggs to revive goldman's reputation. pay attenti to the re, real difficulties that are behind some of the rude remarks that are made about the firm and recognize that those problems have to be dealt with. and i know you are dealing with them, but you are going to have to deal with them even more intensively than you have. and you're probably going to have to make some public terminations of prominent people in order to get the message sent internally and externally how deeply committed i know you are personally. >> reporter: goldman sachs says it has reached out to greg smith to learn more about his concerns but hasn't heard back. in a memo obtained by "nightly business report," lloyd blankfein told employees: "we are far from perfect, but where the firm has seen a problem, we've responded to it seriously and substantively."

as far as the employees are concerned, i think everybody recognizes what's going on inside the company. this particular employee, i

think, chose todowse himself with gasoline and light himself on fire. i don't know how any other major employer on wall street would be willing to hire somebody who resigned in such a public way on the oped pages of the "new york times". >> susie: you wrote about goldman and profiled it eight years ago. has something changed at goldman? has the culture changed as greg smith wrote about in the oped piece today? >> well, you raise an interesting point n. my book, i pointed out how goldman has strong values. like putteding the client first, and hiring brilliant people who are good team players. they have four team values they feature prom nenltly on their website. and the big thing when lloyd blankfine became ceo, during that time the stock price fell 20% interestingly enough. he is a trader. and he bring that is trading

mentality to the firm. the trading mentality is very, very short term. it doesn't stress having relationships with ceos. if, on the other hand, before 2006, there was a better balance between trading and investment banking and investment banking involves establishing relationships with ceos over the long term where they're kind of behavior that goldman has demonstrated, most prominently in 2007 would not have been available. soox*uds we have a half minute left. i topt ask you this. what's the fallout from this, from the point of view that investors are selling off the stock, and goldman down sharply. it lost something like $ billion o its market value. and whal does it mean for clients? real quickly. >> they am not lose business unless they lose a lot of their best team. i think this will be an isolated instent, and therefore, i think that goldman will be okay. >> susie: we'll leave it

there. peter, thanks for coming o.d >> thank you. >> susie: and we've been speaking with peter cohan, management consultant and author. >> susie: on wall street today, the spotlight was squarely on financial stocks, and that helped give the broader market a lift. let's take a closer look at all the big market movers in tonight's "market focus."

many big banks were the big winners today, with the exception of goldman sachs and citi. investors gobbled up bank stocks. there were also big moves in insurance stocks, retailers and gold miners. let's start with the k.b.w. bank index, which tracks 24 of the biggest financial firms. it rose 1.3% as investors had a chanceo react to generally positive results from the federal reserve's stress tests. bank of america was the biggest mover in the dow today. shares of the nation's biggest bank rose more than 4%, hitting levels not seen since last summer. as we reported, the bank passed its stress test, a relief to many investors. american express shares jumped almost $2, or 3.5%, after it announced a stock buyback worth $4 billion. the shares are now trading at pre-financial crisis levels. but the fed's stress test results took a toll on many insurance stocks. investors now fear the industry's biggest names will face tighter capital requirements.

met life was the biggest loser in the s&p 500 index. the shares fell $2.30, or almost 6%, after its plan for a buyback was rejected by the fed. shares of prudential financial slipped alongside met life, falling $1.49 to $61.58 even though "pru" wasn't even subjected to a stress test. but investors think there's a good chance both insurers will be more closely monitored by the fed. there were also big moves in two major retail chains on earnings news, but that's where the similarity ends. shares of pacific sunwear fell a whopping 18% after the teen retailer posted a deep fourth quarter loss. it also issued a disappointing first quarter forecast. on the flip side: francesca's holdings. it operates a chain of boutiques selling apparel and accessories. the company's fourth quarter earnings surged 93%, and that prompted at least three brokerage firms to raise their price targets on the stock. ares rose more than 9%.

and as we told you, gold prices fell sharply today, and that did hurt gold mining stocks. barrick gold, the world's largest gold producer, fell more than 4%; kinross gold tumbled more than 6%; and newmont mining slipped 1%. and finally tonight, a look at the biggest loser in the dow. disney shares lost over 1% after it's big-budget film "john carter" bombed in its box office debut. and on that note, that's tonight's "market focus." >> susie: the pressure is on, from the white house to state capitols, to cut college costs. as states slash appropriations, many colleges say trimming the budget is a tough assignment. sylvia hall visits a school

system in pennsylvania to see how its handling the cuts. >> reporter: a cafeteria serves meals without trays. new, energy-effient buildings cut down on heating, cooling and lighting bills, and 50 jobs sit empty. the strategies look different, but at shippensburg university they all serve the same purpose: cutting costs in a time when every penny counts. >> we are at a point where we have to say everything is available to be reduced. >> reporter: this year, shippensburg university and its 13 sister schools face a possible 20% drop in state funding. that threat comes after an 18% cut last year. system chancellor john cavanaugh says that rces tough decisions. >> so, if we're going to fix a roof on a building, for example, that's now going to have to come out of the operating budget, which means you're going to have to make a choice: do we fix the building or do we offer a section? and those are choices that are difficult to make.

>> reporter: shippensburg isn't unique. state appropriations to colleges across the country have been falling for years. and as cash-strapped states struggle, college support is often cut. goldie blumenstyk has written about it for years. >> states are not keeping up. ere's a lot of disinvestment inublic higher education going on right now, and that's where 85% of the college students go to college. >> reporter: in-state tuition and fees at shippensburg is up more than 7% this year. it runs just below $9,000 per year, close to the national average. >> 20 years ago, the state paid for almost twice as much as what they're paying for now. so, if the state isn't paying for it, then that cost gets shifted over onto to the student. >> reporter: cavanaugh says at this point the transfer from state funding to student tuition is almost dollar for dollar. some say its time for colleges and universities to step outside the traditional model and start finding new ways to do more with less. some of those new ways at shippensburg include online

classes and using video conferencing to teach across multiple campuses. they've also stepped outside the semester system to offer some shorter courses. >> yes, we're adding more online classes. yes, we're adding more summer classes. yes, we're adding more winter classes. yes, we raise class sizes. the challenge with raising class sizes, you get to a point where you ruin the educational experience. >> reporter: these administrators say more clarity about how much money will be coming from state governments in the years ahead, not just next year, will help them plan new ways to deliver a college education to students. sylvia hall, "nightly business report," shippensburg, pennsylvania. >> susie: in the "money file" tonight: your relationship, and your relationship with money. here's manisha thakor, author of "on my own two feet: a modern girl's guide to personal finance." >> last week, my hubby and i had dinner with our dear friends, harry and oliv. towards the end of the meal, harry asked a very interesting question. when you pick up a menu, what

side do you look at first, the right or the left? harry and i both immediately said the right while my hubby and olivia both said the left. now, what's on the right side of a menu? why, the prices! and what's listed on the left of the menu? the food! harry's question beautifully highlights a trend academics have long noticed, namely that we are often attracted to our financial opposites when it comes to financial behavior. turns out there's something intoxicating about "financial otherness," especially in the early stages of courtship. that's why so many savers end up marrying spenders and vice- versa. our dinner conversation inspired me to consider other areas of our finances where behavioral patterns play a significant roll. digging around, i was thrilled to discover fresh insights from c.f.p. carl richards in his new book, "the behavior gap: simple ways to stop doing dumb things with money." reading "the behavior gap" reminded me that one upside to

this choppy economy is that it's a great catalyst for thinking about whether there are any financial habits you want to adjust to increase your happiness. i'm manisha thakor. >> susie: here's what we're watching for tomorrow. we'll get a check on inflation at the wholesale level with february's producer price index. the big board gets revved up for allison transmission. the autoparts maker is expected to be the largest manufacturing i.p.o. this year. and we learn how junior achievement is grooming the nation's next generation of entrepreneurs. that's "nightly business report" for wednesday, march 14. we want to remind you this is the time of year your public television station seeks your support, support that makes programs like "n.b.r." possible. thanks for joining us. i'm susie gharib. we'll see all of you again tomorrow evening. "nightly business report" is made possible by:

captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org

>> susie: i'm susie gharib with a "nightly business report" news brief. one day after the year's biggest point gains, the dow extends its winning streak. it's now six straight sessions to the upside for the blue chips, rising 16 points. the nasdaq added nearly a point and the s&p was off almost two. goldman sachs says it has reached out to former executive greg smith to learn why he chose to publish his resignation in the op-ed section of the new york "times." and tomorrow, the big board gets revved up for allison transmission. the autoparts maker could be the

largest manufacturing i.p.o. this year for more financial news, tune in to "nightly business report" weeknights on this public television station.